Consumers enjoy lower interest rates

MANILA, Philippines – Filipino consumers as well as borrowers continued to enjoy lower interest rates as the estimated interest rate pass-through improved steadily as of end-October this year, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Diwa Guinigundo told reporters that the estimated pass-through has improved to 86 percent as of end-October from 83 percent as of end-September.

An 86 percent pass-through means that banks have reduced their interest rates by 172 basis points since December last year.

Pass through is defined as the ratio between the change in the lending rate and the change in the policy rate since the beginning of the easing cycle.

The central bank’s Monetary Board has slashed key policy rates by 200 basis points from December 2008 to July this year as part of easing measures to boost the country’s slackening domestic economy.

This brought the overnight borrowing rate to a record low of four percent from six percent and the overnight lending rate to six percent from eight percent.

In a recent survey conducted by the International Monetary Fund (IMF), the Philippines emerged as the third fastest country and third largest in Asia in terms of passing on to the consumers lower interest rates brought about by the easing cycle of central banks.

Data showed that the Philippines emerged as the third largest in terms of interest rate pass-through with almost 70 percent as of August, next to Australia’s 90+ percent and Malaysia’s 80+ percent. –Lawrence Agcaoili (The Philippine Star)